Construction Risk

Construction Risk

The construction phase risk, along with being highly risky requires large volumes of finance. A mixture of equity, subordinated debt, senior debt & guarantees are used. The main risk is the completion risk; the project may not be completed on time or at all, due to various reasons such as cost overruns, technology failure, force majeure etc.

Nature of Risk

  • Ability to commence the project within the budgeted time
  • Ability to complete project within the budgeted costs
  • Ability to deliver the requisite quality

Key Issues

  • Land acquisition
  • Availability & Prices – materials, equipment & services, labour
  • Fixed price/ time contracts
  • Commodity exchanges

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